The metal slipped as much as 2.2% after ending Wednesday 0.6% higher in the wake of a searing inflation report from the US. Investors bet that the Fed is more likely than not to raise interest rates by 100 basis points when it meets later this month, a move that would boost the chances of the economy entering a recession.
By Thursday, investors had digested the inflation news and again turned away from gold to the greenback as a hedge, according to David Lennox, a resources analyst at Fat Prophets.
“We’d really need to see a much lower US dollar for gold to get a sustained positive kick going forward,” Lennox said. “Investors are turning more to the greenback than bullion as a haven asset.”
The Bloomberg Dollar Spot Index gained 0.7% and touched its highest level on record, eclipsing the 2020 peak from the Covid-19 pandemic.
Gold prices have been volatile this year as Russia’s invasion of Ukraine spurred a rally to well above $2,000 an ounce in March, only for the momentum to fade as the growth and inflation outlook shifted. In recent weeks, investors have cut holdings in bullion-backed exchange-traded funds.
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